House from parents

Keep_pedalling

becmarv wrote: »

The threshold will be £425,000 so at the current price it will be 40% on the £25,000 difference.

So I am working that out as £10,000 to pay. But you've lost me on the estates bit

But that will rise to £450k on April 6, £475k a year later and £500k the year after that. If the OPs MIL is a widow then there is also the transferable nil rate bands which means she could leave up to £1M tax free.

Taking ownership of her home with a substantial part of that being a gift won’t help with IHT if she continues to live in it as that would be a gift with reservation and as such wountfall outof her estate.

Seems to me that this is a rather knee jerk reaction to a problem that may not even exist.

becmarv

That's a good question, unfortunately we don't know any of this information. My MIL just assumed it would be a case of leaving it to him in her will and that's that. She's from a time where there were 100% mortgages and no stamp duty.

I think we most probably need a little bit more advice than expected to be fair.

becmarv

Keep pedalling ...

Yes the prices for the threshold will go up but as will the house, it's now considered to be in London.

Not sure why or what you mean by it being knee jerk reaction, I am just trying to understand how it all works as evidently I don't know enough information about it and both my partner and his mother thought it was just as simple as her leaving their family home to him. I'd rather know now what's expected than be completely unaware in years to come and not be able to afford it.

Keep_pedalling

becmarv wrote: »

Keep pedalling ...

Yes the prices for the threshold will go up but as will the house, it's now considered to be in London.

Not sure why or what you mean by it being knee jerk reaction, I am just trying to understand how it all works as evidently I don't know enough information about it and both my partner and his mother thought it was just as simple as her leaving their family home to him. I'd rather know now what's expected than be completely unaware in years to come and not be able to afford it.

What do you mean by can’t afford it? Benificiaries do not pay tax the estate does.

Is your MIL a widow?

kingstreet

When you make a will, you name an Executor.

On death, the Executor handles the valuation and distribution of the estate, settling any taxes along the way.

If the property is the estate's only asset it would be sold to pay the Inheritance Tax due, or your boyfriend will have the option of "buying" it from the estate for the amount of the Inheritance tax due as the Estate will need cash to pay the tax.

becmarv

Keep pedalling..

Not be able to afford the cost of the taxes due. No she is a single unmarried female with no other children.

King street..

Right i think I am understanding you better, so we really need to work out her assets and estates to see how much the inheritance tax would be first. If we wanted to keep the house we would have to pay the inheritance tax of all of her assets not just the house, is that correct?

Apologies if I am missing things.

amnblog

becmarv wrote: »

She's from a time where there were 100% mortgages and no stamp duty.

I thought stamp duty arose out of the Napoleonic wars, so fair play to your mother in law for still having an interest.

Keep_pedalling

Is this really about him wanting to keep his mother’s house?

noh

You are able to pay the IHT due on property in installments over a period of 10 years
https://www.gov.uk/paying-inheritance-tax/yearly-instalments

AnotherJoe

becmarv wrote: »

What my partner and his mother don't realise however is inheritance tax will require a large sum of money to be paid.

.

No, it won’t. If she got hit by a London bus tomorrow it might be ten or twenty £k for which since you intend to either live in the property or rent it out a very modest mortage would suffice.

And if that bus doesn’t turn up for ten or 15 years it will likely be no more than that in relative terms.

However you’re working out IHT you’re doing it wrong.